# Understanding Morpho Vaults: Enabling Diverse Risk Profile

By [Morpho](https://paragraph.com/@morpho) · 2024-02-20

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Morpho Vaults (formerly known as MetaMorpho Vaults) combines the best of isolated markets and multi-asset lending pools to create a better way to lend. In time, we believe Morpho Vaults will become the default lending solution.

Last week, we introduced the Understanding Morpho Vaults article series with [**Part One: Intro to the Morpho Approach & Simplifying Isolated Markets**](https://morpho.mirror.xyz/ydE_6frnAMMXDHaDX33y76ATmf0h3UH6tfFd5BMMfmU)**.**

Today, we share **Part Two: Enabling Diverse Risk Profiles** to explain how, unlike the traditional one-size-fits-all approach taken by multi-asset lending pools, Morpho Vaults can cater to any risk profile imaginable.

Going beyond one-size-fits-all
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Every user has their own tolerance for risk and each collateral asset has a set of associated risks, some with more than others.

For that reason, users with a lower risk tolerance may prefer to avoid lending against certain collateral assets, whereas it may be the opposite for users with a greater appetite for risk.

However, a core limitation of multi-asset lending pools is that all users are forced into a one-size-fits-all risk profile, regardless of their risk appetite.

![](https://storage.googleapis.com/papyrus_images/3cfaba9b2fba246544343277fcca34db78accd58dce5beb2e2d8ea75dc99f317.png)

The above illustrates how every lender to a multi-asset pool is exposed to every collateral asset in the pool: wstETH, WBTC, LINK, USDT, sDAI, DAI, rETH, RPL, AAVE, USDC, LINK, etc. There is no option to lend against specific collateral or a combination of collateral assets aligned with one's tolerance for risk.

Catering to any risk profile
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Morpho Vaults are built on top of Morpho Blue’s isolated markets. Each vault has a unique risk profile determined by the markets it lends to.

Lenders can choose to deposit in vaults that best align with their risk appetite. Users with a higher risk tolerance can deposit in a vault that lends to certain markets and vice versa.

![](https://storage.googleapis.com/papyrus_images/05a0038018e4e962ce6ab0af3a483d87b3ae5b4adc23a710e4be7bef5af7f53f.png)

For example, the chart shows three different lenders depositing in three different vaults:

*   USDC Vault lending to wstETH/USDC & wbIB01/USDC
    
*   ETH Vault lending to wstETH/WETH & sDAI/WETH
    
*   ETH Vault lending to weETH/WETH, osETH/WETH, and swETH/WETH
    

Each lender can deposit into one or more vaults to tailor their risk exposure:

*   Lender #1 has exposure to wstETH (crypto) and wbIB01 (RWA) markets.
    
*   Lender #2 has exposure to wstETH and sDAI markets.
    
*   Lender#3 has exposure to weETH, osETH, and swETH markets.
    

This approach allows lenders to opt in and out of certain markets providing them with a level of flexibility unattainable from multi-asset lending pools. Importantly, it can scale to any number of vaults, markets, and risk profiles catering to any risk profile imaginable.

![](https://storage.googleapis.com/papyrus_images/200223647e12517fac16120704339efb9d6ae67b5aa565ea6972007163a449a7.png)

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This is the end of part two of the Understanding Morpho Vaults series. Next week, we will release **Part Three: Aggregating then Amplifying Liquidity For Lenders**.

Make sure you are subscribed to [Morpho](https://morpho.mirror.xyz/) to receive notifications.

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*Originally published on [Morpho](https://paragraph.com/@morpho/understanding-morpho-vaults-enabling-diverse-risk-profile)*